Letters to Policy Makers

Open letter to EU Environment Ministers on the revision of the EU ETS

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Category: Letters to Policy Makers

Published: 27 February 2017

Dear Environment Minister,

Ahead of the Environment Council we, the undersigned, representing 32 networks and organizations from 30 countries, would like to urge you to ensure that the low-carbon funding mechanisms dedicated to help lower-income Member States transform their energy systems (article 10c and the Modernization Fund) are robust and well-designed to truly support the development of renewable energy and energy savings instead of subsidizing coal plants.

If the EU wants to be coherent in its commitments made in Paris, then, old and inefficient coal power plants in Europe will have to be closed down.

We therefore call on you to support proposals that:

1. Exclude investments in coal power under both Art 10c and the Modernisation fund through a strict emission performance standard.

Both article 10c and the Modernization Fund are transitional mechanisms aimed to support transformation and diversification of energy systems. However, in the current phase of the ETS a large majority of up to €12 billion investments through article 10c financed the expansion of fossil fuel capacity in Central and Eastern Europe (CEE), including hard coal and lignite. Allowing to continue using these to subsidize coal/lignite plants will have detrimental impacts on public health and the environment. Furthermore, it will hinder the transition to renewable-energy based and energy efficient economies. Instead, the Modernization fund and article 10c should be used to shift investments to energy efficiency and renewable energy sources.

2. Secure strong governance of the Modernisation Fund with a balanced role for all Member States (both beneficiary and non-beneficiary) in setting out investments guidelines for projects.

As the Modernisation Fund comes from a collective funding basis that represents European resources, it must be properly managed. The European Investment Bank should have a decisive role in the selection of projects to benefit from the Fund. Day to day management must be in the hands of an independent management committee, with expertise on project development and finance. Strict monitoring tools should be put in place, and deterring penalties for countries manipulating the Fund should be foreseen.

3. Leave the base year for eligibility to 10c at 2013

Greece tries to gain access to free emission allowances in order to subsidize the operation of 2 new lignite plants that are scheduled to operate after 2020. These plants will not be economically viable without free emission allowances as even the president of the Public Power Corporation has recently admitted in public. Greece’s efforts to become eligible for an article 10c derogation, via a change of the base year from 2013 to either 2014 or 2015 have twice been rejected both in the Environment Committee and the Plenary vote of the European Parliament. Since the subsidization of new lignite plants is certainly not in line with the scope of the ETS, it is very important to keep the base year for any article 10c derogation at 2013.

4. Support establishing a Just Transition Fund

Some communities and regions will need support to transition away from coal. It is therefore essential to support the establishment of a Just Transition Fund, to ensure that no one is left behind in the transition to a safe, clean and mutually prosperous Europe.

1 February 2018
It’s time for more transparency in the EU’s climate and energy planning and modelling
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cc. First Vice-President Frans Timmermans,
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